EMPLOYMENT AGREEMENT
Exhibit 10.1
defined
below) by delivering written notice to Executive, and such termination shall
be
effective upon the date such notice is deemed received by Executive or such
later date if specified in the notice, and (ii) Executive may terminate his
employment without Good Reason (as defined below) by delivering written notice
to Company, and such termination shall be effective eighteen (18) months
after
the date such notice is received by Company, or sooner at the election of
the
Board (but in no event less than six (6) months after Company’s receipt of the
notice). In the event that Company terminates Executive’s employment for Cause
or Executive terminates his employment without Good Reason, then Executive
shall
only be entitled to the compensation, unpaid expenses, unpaid vacation days
and
other benefits provided for in Paragraph 3 of this Agreement through the
date of
such termination. As used herein, “Cause” shall mean any of the following
events: (a) Executive is convicted, or pleads guilty or nolo contendre to,
a
felony or a crime involving moral turpitude; (b) Executive engages in gross
negligence or gross or willful misconduct in connection with the performance
of
his responsibilities under this Agreement; (c) after written notice to
Executive, Executive repeatedly fails to comply materially with any material
Company policy; or (d) Executive materially breaches any material term or
provision of this Agreement and fails to cure such breach within thirty (30)
days after he receives written notice thereof from Company.
Company
immediately before such merger, consolidation, tender offer or other transaction
do not own, directly or indirectly, immediately following such merger,
consolidation, tender offer or other transaction, more than fifty percent
(50%)
of the combined voting power of the outstanding voting securities of the
entity
resulting from such merger, consolidation, tender offer or other transaction.
not
to
make, use or disclose any Confidential Information or Trade Secrets to any
person, company, firm, organization or other entity, or encourage any such
person, company, firm, organization or other entity to make use of such
Confidential Information or Trade Secrets.
during
the entire said one (1) year period, then Company shall have no obligation
to
pay said balance to Executive.
construed
as prohibiting Company from pursuing any other remedies available to it for
such
breach or threatened breach, including the recovering of any damages which
it is
able to prove. Each of the covenants in Paragraph 5 shall be construed as
independent of any other covenants or provisions of this Agreement. In the
event
of any judicial determination that any of the covenants set forth in Paragraph
5
herein or any other provisions of the Agreement are not fully enforceable,
it is
the intention and desire of the parties that the court treat said covenants
as
having been modified to the extent deemed necessary by the court to render
them
reasonable and enforceable and that the court enforce them to such
extent.
or
the
intent of any provisions thereof. No provision of this document is to be
interpreted for or against any party because that party or party’s legal
representative drafted it.
THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into this 27th day
of September, 2006, by and between AMBASSADORS GROUP, INC. (“Company”), a
Delaware corporation, and XXXXXXX X. XXXXXX (“Executive”), with reference to the
following facts:
A. Executive
has been serving Company as President and Chief Executive Officer in a
satisfactory and capable manner.
B. Company
has requested that Executive enter into an employment agreement with Company
with respect to matters relating to continued employment with Company, and
Executive has agreed to do so, upon the terms and conditions set forth
herein.
NOW,
THEREFORE, in consideration of the terms and conditions and the mutual
agreements and covenants set forth herein, the parties hereto agree as
follows:
1. SCOPE
OF EMPLOYMENT.
1.1 Capacity.
Company
hereby continues to employ Executive, and Executive hereby accepts continued
employment, as President and Chief Executive Officer of Company. Executive
shall
report to the Board of Directors of Company (“Board”) and perform the services
and duties customarily incident to such titles.
1.2 Devotion
of Services.
Executive shall devote his entire business time, ability and attention
exclusively to the business of Company during the Term of Employment (as defined
below), except for passive investments, charitable and non-profit enterprises
and any other business investments which do not interfere with his duties
hereunder and which are not competitive with Company’s activities (including,
without limitation, as the owner of less than 1% of the issued and outstanding
capital stock of a publicly traded corporation). Executive shall perform and
discharge well and faithfully those duties assigned him by the Board. Executive
shall perform his services under this Agreement primarily at Company’s offices
in or about the Spokane area, or such other location as is acceptable to
Executive.
2. TERM
OF EMPLOYMENT.
The
term of Executive’s employment under this Agreement shall commence as of the
date first set forth above and, unless sooner terminated pursuant to Paragraph
4
of this Agreement, shall terminate upon the close of business eighteen (18)
months following the date that either party notifies the other in writing that
the notifying party elects to terminate such employment (“Term of Employment”).
3. COMPENSATION.
3.1 Salary
and Bonus.
In
consideration of the services to be rendered by Executive hereunder including,
without limitation, any services rendered as an officer or director of Company
and/or any subsidiary thereof, Company shall pay to Executive the following
during the Term of Employment:
(a) A
base
salary in the amount of $400,000.00 per annum, which salary shall be reviewed
no
less frequent than annually by Company’s Board or Compensation Committee. The
Board or Compensation Committee may increase Executive’s base salary but, in no
event, may Executive’s base salary be reduced during the Term of
Employment.
(b) Company
presently intends to continue its annual cash incentive plan with respect to
Executive; provided, however, the amount of the annual cash incentive, if any,
shall be at the discretion of Company’s Board or Compensation
Committee.
(c) All
payments to Executive shall be subject to the applicable withholding
requirements of all appropriate governmental authorities.
(d) Company
presently intends to continue its annual stock option and restricted stock
grants with respect to Executive; provided, however, the number of options
and/or restricted stock granted, if any, shall be at the discretion of Company’s
Board or such committee.
3.2 Other
Benefits.
During
the Term of Employment, Executive shall be entitled to participate in all
employee pension and welfare benefit plans and programs made available to
Company’s senior members of management, as such plans or programs may be in
effect from time to time including, without limitation, pension, profit sharing,
savings and other retirement plans or programs, accidental death and
dismemberment protection, and health and medical plans.
3.3 Expenses.
Company
will advance to or reimburse Executive for all reasonable travel and
entertainment required by Company and other reasonable expenses incurred by
Executive in connection with the performance of his services under this
Agreement in accordance with Company policy as established from time to time.
3.4 Vacation.
Executive shall be entitled to not less than twenty-five (25) days of vacation
during each fiscal year of Company, during which time Executive’s compensation
shall be paid in full. Executive’s vacation allowance shall be applied and
extended under the same terms and conditions as are generally applicable to
other senior members of Company’s management.
4. TERMINATION
OF EMPLOYMENT.
4.1 Termination
by Company for Cause; Termination by Executive Without Good
Reason.
Notwithstanding the provisions of Paragraph 2 of this Agreement, (i) Company
may
terminate Executive’s employment at any time for Cause (as
2
4.2 Termination
by Executive With Good Reason; Termination by Company Without
Cause.
Notwithstanding the provisions of Paragraph 2 of this Agreement, (i) Executive
may terminate his employment with Good Reason (as defined below) by delivering
written notice to Company, and such termination shall be effective thirty (30)
days after the date such notice is deemed received by Company or such later
date
(not to exceed three (3) months) as may be selected by the Board, and (ii)
Company may terminate Executive’s employment without Cause by delivering written
notice to Executive and such termination shall be effective upon the date that
such notice is deemed received by Executive or such later date (not to exceed
three (3) months) as may be specified in the notice. In the event that Executive
terminates his employment with Good Reason, or Company terminates Executive’s
employment without Cause, then Company shall pay to Executive all of the
following upon the following terms and conditions:
(i) All
of
the unpaid compensation, unpaid expenses, unpaid vacation days, prorated bonuses
and other benefits provided for in Paragraph 3 through the date of such
termination;
(ii) An
amount
equal to the projected cost of Executive’s medical insurance under COBRA for the
eighteen (18) month period immediately following the termination;
(iii) In
the
event that the notice of termination is given in anticipation of, or within
the
two (2) year period immediately following, a Change in Control (as defined
below), an amount equal to the average annual base salary plus the average
annual bonus paid to Executive for the two (2) full fiscal years immediately
preceding termination (in determining the annual bonuses, there shall be
included the cash amounts as well as that value ascribed for financial
accounting purposes on the dates of the grants to any and all option and share
grants given to Executive);
3
(iv) All
of
Executive’s unvested stock options and stock grants shall fully vest upon the
date that the termination becomes effective;
(v) The
payments provided for in clauses (i), (ii) and (iii) of this Section 4.2 shall
be paid in full on the effective date of the termination and all such payments
shall be subject to the applicable withholding requirements of all appropriate
governmental authorities; and
(vi) Notwithstanding
anything to the contrary contained herein, in the event that any payments and/or
other consideration to be received by Executive under this Section 4.2 and
Section 5.8 below are subject to the deduction limitations and tax imposed
by
Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended
(“Code”), or to any similar tax imposed by state or local law, or to any
interest or penalties with respect to such taxes (such taxes together with
any
such interest and penalties shall hereafter collectively be referred to as
“Excise Tax”), then the total amount of such payments and value of the other
consideration shall be reduced, or refunded, as the case may be, by the minimum
amount necessary so as to avoid the application of any Excise Tax.
As
used
herein, the term “Good Reason” shall mean any of the following
events:
(a) Withdrawal
by Company from Executive of any substantial part of his duties then being
performed, or responsibility or authority then being carried by him, or a
material change in Executive’s reporting lines;
(b) Assignment
by Company to Executive of substantial additional duties or responsibilities
which are inconsistent with the duties or responsibilities then being carried
out by Executive;
(c) Material
reduction in the level of Executive’s responsibility, authority, autonomy,
title, compensation, executive perquisites, or other employee
benefits;
(d) Failure
to keep Executive in office as President and Chief Executive Officer of
Company;
(e) Company
materially breaches any material term or provision of this Agreement and fails
to cure such breach within thirty (30) days after it receives written notice
thereof from Executive;
(f) Fraud
on
the part of Company; or
(g) Discontinuance
of the active operation of business of Company.
For
purposes of this Agreement, “Change in Control” means the occurrence of any of
the following events: (i) any sale, lease, license, exchange or other transfer
to a party not affiliated with Company (in one transaction or a series of
related transactions) of all, or substantially all, of the business and/or
assets of Company; (ii) a merger or consolidation of Company and Company is
not
the surviving entity; (iii) a reorganization or liquidation of Company; or
(iv)
a merger, consolidation, tender offer or any other transaction involving Company
if the equity holders of
4
4.3 Death
or Permanent Disability.
Executive’s employment shall terminate immediately upon the date of Executive’s
death. In the event that Executive becomes physically or mentally disabled
so as
to become unable for more than one hundred eighty (180) days in the aggregate
in
any twelve (12) month period to perform his duties on a full-time basis with
reasonable accommodations, Company may, at its sole discretion, terminate
Executive’s employment. Upon the date of Executive’s death (if during the term
of his employment) or upon Company’s termination of Executive’s employment due
to a disability as provided above, then: (i) Executive shall be entitled to
all
of the unpaid compensation, unpaid expenses, unpaid vacation days, prorated
bonuses and other benefits provided for in Paragraph 3 through the date of
Executive’s death or termination for disability; and (ii) all of Executive’s
unvested stock options and stock grants in Company shall fully vest on such
date.
4.4 Application
of Section 409A.
To the
extent applicable, it is intended that this Agreement comply with the provisions
of Section 409A of the Code, and shall be interpreted in accordance therewith.
This Agreement shall be administered in a manner consistent with this intent,
and any provision that would cause this Agreement to fail to satisfy Section
409A of the Code shall have no force and effect until amended by the parties
to
comply with Section 409A (which amendment may be retroactive to the extent
permitted by Section 409A). Notwithstanding the foregoing, if Executive is
a
“specified employee” (as defined under Section 409A) and, to the extent that any
payment or portion of a payment under Paragraph 4 of this Agreement is
determined by Company to constitute a “deferral of compensation” under Section
409A to which the “short-term deferral” exception does not apply, then such
payment or portion of a payment shall be paid to Executive by Company in cash
and in full, as soon as practicable following six (6) months after Executive’s
“separation from service” with Company (as such phrase is defined in Section
409A). If Executive dies before such payment or portion of a payment has been
paid, such unpaid amounts shall be paid as soon as practicable following
Executive’s death to the personal representative of Executive’s
estate.
5. NONCOMPETITION
AND NONSOLICITATION.
5.1 Noncompetition.
Executive acknowledges and agrees that he has received and shall continue to
receive valuable Confidential Information (as defined below) and Trade Secrets
(as defined below) of Company and exposure to key suppliers, service providers,
group leaders and educational tour customers of Company. Accordingly, because
of
Executive’s access to, and knowledge of, Company’s Confidential Information and
Trade Secrets and key suppliers, service providers and customers, as well as
Executive’s extraordinary position within Company, Executive would be in a
unique position to divert business from Company and to commit irreparable damage
to Company were Executive to be allowed to compete with Company or to commit
any
of the other acts prohibited below.
5
Executive
therefore agrees that, in order to protect the legitimate business interests
of
Company, Executive shall not, during the Term of Employment and for the
Noncompete Period (as defined below), directly or indirectly, own, organize,
consult with, be employed by, advise, be a partner of or joint venturer with,
be
a director or managing member of, or otherwise assist or provide services to,
any Competitor within the Restricted Area (as each is defined below) except
to
the extent Executive is acting on behalf of Company.
5.2 Nonsolicitation
of Employees.
Executive acknowledges and agrees that Company has expended and will continue
to
expend significant time, effort and resources in the hiring, training and
development of an unusual and extraordinary workforce whose identities and
abilities Executive would not know of or learn but for his relationship with
Company. Executive therefore agrees that, during the Term of Employment and
for
the Nonsolicitation Period (as defined below), Executive shall not, directly
or
indirectly, (a) solicit, or attempt to solicit, any employee of, consultant
to
or tour group leader associated with Company to work for, contract with, become
a partner with or otherwise be retained by any Competitor of Company; (b) assist
or advise any such Competitor in hiring, employing, retaining or soliciting
such
employees, consultants or tour group leaders; or (c) encourage any such
employee, consultant or tour group leader to be hired, employed, retained or
solicited by any Competitor.
5.3 Nonsolicitation
of Customers.
Executive acknowledges and agrees that he possesses and will continue to receive
valuable Confidential Information and Trade Secrets of Company and exposure
to
educational tour customers and potential customers of Company. Executive
therefore agrees that, during the Term of Employment and for the Nonsolicitation
Period, Executive shall not, directly or indirectly, solicit any educational
tour customers or potential customers of Company with whom Executive had contact
with or about whom Executive learned information during Executive’s employment
with Company on behalf of any other entity or person. Executive further agrees
that he shall not disparage Company, its officers and directors or educational
tour programs to such customers or potential customers.
5.4 Nonsolicitation
of Suppliers and Service Providers.
Executive acknowledges and agrees that Executive has received and shall continue
to receive valuable Confidential Information and Trade Secrets of Company with
respect to its relationships with its suppliers and service providers such
as
hotels and travel operators and that the ability to acquire services from such
suppliers and service providers is limited. Accordingly, such relationships
constitute valuable assets of Company. Executive therefore agrees that, during
the Term of Employment and for the Nonsolicitation Period, Executive shall
not,
directly or indirectly, solicit any suppliers or service providers with whom
Executive had contact with or about whom Executive learned information during
Executive’s employment with Company on behalf of any other entity or person.
Executive further agrees that he shall not disparage Company, its officers,
directors or educational tour programs to such suppliers or service
providers.
5.5 Confidentiality
of Information.
Executive acknowledges and agrees that he has been and shall be exposed to
Company’s Confidential Information and Trade Secrets. Executive agrees to keep
all such information strictly confidential at all times. Except as required
by
Executive’s duties for Company or by virtue of a subpoena or other court order
applicable to Executive, Executive agrees that, both during and after the Term
of Employment,
6
5.6 Return
of Documents and Electronic Media.
At the
end of the Term of Employment, Executive agrees to promptly return to Company
any and all documents and other tangible information and data, regardless of
the
form in which it is recorded, as well as any and all copies and reproductions
of
such documents or other tangible information and data (regardless of the form
of
such copies or reproductions), which Executive (i) received or obtained from
or
on behalf of Company or (ii) prepared, compiled or collected while employed
by
Company. Executive specifically agrees not to retain any copies of any
Confidential Information or Trade Secrets.
5.7 Ownership
of Work Product.
All
work product, data, documentation, information or materials conceived,
discovered, developed or created by Executive in the course of Executive’s work
for Company (collectively, the “Work Product”) shall be owned exclusively by
Company. To the greatest extent possible, any Work Product shall be deemed
to be
a “work made for hire” (as defined in the United States Copyright Act, 17
U.S.C.A. §101 et seq., as amended) and owned exclusively by Company. Executive
hereby unconditionally and irrevocably transfers and assigns to Company all
right, title and interest in or to any such Work Product. Company and Executive
acknowledge that, pursuant to Wash. Rev. Code § 49.44.140(e), any provision in
this Agreement requiring an employee to assign his rights in any Work Product
does not apply to an invention for which no equipment, supplies, facility,
or
trade secret information of the employer was used and which was developed
entirely on the employee’s own time, unless (a) the invention relates (i)
directly to the business of the employer, or (ii) to the employer’s actual or
demonstrably anticipated research or development, or (b) the invention results
from any work performed by the employee for the employer.
5.8 Consideration.
In
consideration for the obligations and covenants to be performed and fulfilled
by
Executive under this Paragraph 5, and except for the termination of
employment under Section 4.3, Company shall pay to Executive, upon the effective
date of the termination of Executive’s employment (except as provided below), an
amount equal to the average annual base salary plus the average annual bonus
paid to Executive for the two (2) full fiscal years immediately preceding
termination. In determining the annual bonuses, there shall be included the
cash
amounts as well as that value ascribed for financial accounting purposes on
the
dates of the grants to any and all option and share grants given to Executive.
Notwithstanding anything to the contrary contained in this Section 5.8, in
the event of the termination of Executive’s employment under Section 4.1
above, the payment required to be made by Company to Executive under this
Section 5.8 shall be paid as follows:
(a) $100,000.00
upon the effective date of the termination of employment; and
(b) The
balance paid one (1) year after the effective date of the termination of
employment, provided that Xxxxxxxx Xxxxxx is employed by Company during the
entire said one (1) year period; in other words, if Xxxxxxxx Xxxxxx is not
employed by Company
7
5.9 Definitions.
(a) A
“Competitor,”
as
used herein, shall mean any person, company (except Company), firm, organization
or other entity which engages in the development, marketing, organizing,
operation or conducting of student educational tours, including without
limitation, those educational tours designed for primary and secondary school
students.
(b) The
term
“Trade
Secret”
shall
be given its broadest possible interpretation and shall mean any and all
documents, information or other data (whether recorded or otherwise) (as defined
below), which concerns Company or its business and which (i) derives independent
economic value, actual or potential, from not being generally known to the
public or to other persons who can obtain economic value from its disclosure
or
use, and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. Such Trade Secret Information includes,
without limitation, information related to Company’s student customers,
potential student customers, suppliers, partners, service providers, travel
operators, marketing plans, advertising, contracts, potential contracts, tour
group leaders, potential tour group leaders, tour group leader training plans,
strategies, forecasts, pricing, methods, practices, techniques, business plans,
financial plans, research, development, purchasing, accounting, programming
and/or tour development.
(c) The
term
“Confidential
Information”
shall
also be given its broadest possible interpretation and shall mean any and all
information disclosed or made available by Company to Executive, including
without limitation any information which is not publicly known or available
upon
which Company’s business or success depends.
(d) “Noncompete
Period”
shall
be the two (2) year period immediately following the end of the Term of
Employment.
(e) “Nonsolicitation
Period”
shall
be the two (2) year period immediately following the end of the Term of
Employment.
(f) “Restricted
Area”
shall
be any state, province, territory or foreign country in which Company markets,
operates or conducts its educational tour programs during the Term of
Employment.
6. EQUITABLE
REMEDIES.
6.1 Injunctive
Relief.
Executive acknowledges and agrees that the covenants set forth in Paragraph
5
herein are reasonable and necessary for protection of Company’s business
interests, that irreparable injury will result to Company if Executive breaches
any of the terms of said covenants and that, in the event of Executive’s actual
or threatened breach of said covenants, Company will have no adequate remedy
at
law. Executive accordingly agrees that, in the event of actual or threatened
breach of any of such covenants, Company shall be entitled to immediate
injunctive and other equitable relief, without bond and without the necessity
of
showing actual monetary damages. Nothing contained herein shall be
8
6.2 Specific
Enforcement.
Executive agrees and acknowledges that he is obligated under this Agreement
to
render services of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value, so that the loss
thereof could not be reasonably or adequately compensated in damages in an
action at law. Therefore, in addition to other remedies provided by law, Company
shall have the right to obtain specific performance hereof by Executive and
to
obtain injunctive relief against the performance of service elsewhere by
Executive during the Term of Employment.
7. GENERAL.
7.1 Entire
Agreement.
This
Agreement contains the entire under-standing between the parties hereto with
respect to the subject matter herein and supersedes all other oral and written
agreements or understandings that may exist between them concerning the subject
matter herein.
7.2 Amendment.
This
Agreement may not be modified, amended, altered or supplemented except by
written agreement between Executive and Company.
7.3 Counterparts;
Facsimile Signature.
This
Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument. This Agreement may be executed and delivered by facsimile
signature.
7.4 Jurisdiction.
Each
party hereby consents to the exclusive jurisdiction of the state and federal
courts sitting in Spokane, Washington, in any action on a claim arising out
of,
under or in connection with this Agreement or the transactions contemplated
by
this Agreement. Each party further agrees that personal jurisdiction over him
or
it may be effected by service of process by registered or certified mail
addressed as provided in Section 9.9 herein, and that when so made shall be
as
if served upon him or it personally within the State of Washington.
7.5 Expenses.
In the
event an action at law or in equity is required to enforce or interpret the
terms and conditions of this Agreement, the prevailing party shall be entitled
to reasonable attorney’s fees and costs in addition to any other relief to which
that party may be entitled.
7.6 Interpretation.
The
headings herein are inserted only as a matter of convenience and reference,
and
in no way define, limit or describe the scope of this Agreement
9
7.7 Successors
and Assigns.
This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their heirs, successors, assigns and personal representatives. As used
herein, the successors of Company shall include, but not be limited to, any
successor by way of merger, consolidation, sale of all or substantially all
of
its assets or similar reorganization. In no event may Executive assign any
rights or duties under this Agreement.
7.8 Controlling
Law; Severability.
The
validity and construction of this Agreement or of any of its provisions shall
be
determined under the laws of the State of Washington. Should any provision
of
this Agreement be invalid either due to the duration thereof or the scope of
the
prohibited activity, such provision shall be limited by the court to the extent
necessary to make it enforceable and, if invalid for any other reason, such
invalidity or unenforceability shall not affect or limit the validity and
enforceability of the other provisions hereof.
7.9 Notices.
Any
notice required or permitted to be given under this Agreement shall be
sufficient if in writing and if personally received by the party to whom it
is
sent or delivered, or if sent by registered or certified mail, postage prepaid,
to Executive’s residence in the case of notice to Executive, or to its principal
office if to Company. A notice is deemed received or delivered on the earlier
of
the day received or three (3) days after being sent by registered or certified
mail in the manner described in this Section.
7.10 Waiver
of Breach.
The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
7.11 Survival.
Notwithstanding anything to the contrary contained in this Agreement, the rights
and obligations of each party under Paragraphs 4, 5 and 6 shall survive the
termination of Executive’s employment with Company.
7.12 Key
Man Life Insurance.
At any
time during the Term of Employment, Company may, but shall not be obligated
to,
take out and maintain, at Company’s sole cost and expense, one or more insurance
policies on the life of Executive, with Company being the sole owner and sole
beneficiary. Company shall have the right, at any time and from time to time
during the Term of Employment, to increase or decrease the amount(s) of such
insurance. Executive agrees to cooperate with Company in connection with such
policies, including but not limited to the taking of medical
examinations.
[Signatures
on next page]
10
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
AMBASSADORS
GROUP, INC.
By:____________________________
Xxxxxxxx
X. Xxxx
Chief
Financial Officer
By: ____________________________
Xxxxxxx
X. X. Xxxxxxx
Chairman
of Compensation Committee
________________________________
XXXXXXX
X. XXXXXX
